Jakarta. Indonesia’s exports of goods, including palm oil, to the United Arab Emirates are set to skyrocket with a bilateral trade pact now in place. 

The Indonesia-UAE Comprehensive Economic Partnership Agreement (CEPA) came into force on September 1. The trade deal will gradually slash or eliminate the import duties for Emirates-bound Indonesian exported goods and vice versa. At a recent gala dinner with Emirati diplomats in Jakarta, Chief Economic Affairs Minister Airlangga Hartarto said the CEPA was a historic milestone in Indonesia’s trade ties with the Emirates.

“The CEPA is expected to increase [Indonesia’s] exports to the UAE by around $4 billion. It will also increase [our] imports from the UAE by approximately $4 billion,” Airlangga said on Friday.

The CEPA agreement will gradually reduce and eliminate the import duties across up to 94 percent of the tariff posts. Both countries also managed to wrap up the CEPA negotiations within 9 months, which could be considered pretty fast for a trade agreement. 

According to the Foreign Affairs Ministry, palm oil -- one of Indonesia’s top commodities -- gets covered by the deal. The Observatory of the Economic Complexity (OEC) data shows Indonesia exported $241 million of palm oil to the UAE in 2021. This puts palm oil as Indonesia’s second-largest goods export to the Emirates after jewelry ($345 million) that year. 

“The [Indonesia-UAE CEPA] reflects the keenness of the two countries to strengthen relations for a sustainable future, and continue to increase bilateral trade,” the UAE Ambassador to Indonesia, Abdulla Salem Al Dhaheri, said.

Indonesia-UAE trade had skyrocketed from $4 billion in 2021 to $5.1 billion the following year. Bilateral trade reached $3.6 billion in the first 9 months of 2023. Indonesia posted a trade deficit with the UAE, amounting to $463.3 million last year. However, Indonesia saw a $213.8 million surplus in Jan-September 2023, Trade Ministry data shows. 

The government reported that the UAE was Indonesia’s second-largest trading partner in the Middle East in 2022.

The UAE has also shown growing interest in investing in Indonesia’s renewable energy. Abu Dhabi-based renewable energy giant Masdar took part in developing the freshly inaugurated 145-megawatt (Mwac) (192 megawatt-peak) Cirata floating solar plant in West Java. Cirata floating solar plant is the largest of its kind in Southeast Asia. Earlier this year, Masdar announced it had made a strategic investment in Indonesia’s Pertamina Geothermal Energy, as the Emirati company seeks to enter the world’s second-largest geothermal market.

“It is true that our bilateral trade is on the rise. What is more important is investment, particularly in the energy sector, be it a direct investment like what we see in Cirata or how [Masdar] expands its portfolio by investing in Pertamina Geothermal Energy,” Pahala told reporters on the sidelines of the gala dinner.

Indonesia recorded $61.8 million in direct investment from the Emirates in Jan-September 2023.  The UAE became Indonesia’s 25th largest foreign investor after Russia ($78.2 million) over the said period.

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